Appeals from the Orders of the Department of Public Welfare, in case of Appeal of: Hazleton-Saint Joseph Medical Center, Docket Nos. 37-84-4 and 37-85-009, and in case of Appeal of: Episcopal Hospital, Docket Nos. 37-84-61 and 37-85-018.

Judges MacPhail and Barry, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Judge MacPhail.

Author: Macphail

[ 110 Pa. Commw. Page 343]

Episcopal Hospital and Hazleton-St. Joseph Medical Center (Petitioners) appeal adjudications of the Department of Public Welfare (DPW) which denied their appeals of payment rates established by DPW for the period July 1, 1984 through December 31, 1984. We reverse.

On June 22, 1984, DPW sent to each Petitioner its "Hospital DRG Payment Notice" pursuant to the new prospective system of payment for inpatient hospital services provided to medical assistance recipients, to be effective July 1, 1984.*fn1 According to the notices, Episcopal's payment rate was to be $2,036.05, and Hazleton-St. Joseph's rate $1,000.98. Petitioners appealed the rates to DPW's Office of Hearings and Appeals, claiming that the rates were violative of the state constitution and state and federal statutes and regulations.

[ 110 Pa. Commw. Page 344]

While Petitioners' appeals were pending, each received a new payment notice announcing revised rates to be effective January 1, 1985. This notice stated: "Since the payment is prospective in nature, your new rate is being implemented on a prospective basis only. The Department is making no retroactive adjustment to your current rate as a result of this change." Both Petitioners challenged the revised rates, arguing that the rates should be paid retroactive to July 1, 1984 as the prior payment rates were "grossly undervalued and otherwise erroneous."

On May 7, 1986, the Office of Hearings and Appeals adopted the hearing examiner's recommended decision that Petitioners' appeals be denied. Both Petitioners filed petitions for review of the order with this Court, and on June 27, 1986, the appeals were consolidated for our disposition.

Petitioners argue that DPW's calculation of their prospective payment rates for the July 1, 1984 to December 31, 1984 period was inconsistent with DPW regulations, was based on a series of arbitrary and capricious decisions, and was violative of federal law. We note that our scope of review of a DPW decision is limited to a determination of whether the adjudication is supported by substantial evidence, is in accordance with law, and whether any constitutional rights were violated. Harston Hall Nursing and Convalescent Home, Inc. v. Department of Public Welfare, 99 Pa. Commonwealth Ct. 475, 513 A.2d 1097 (1986).

The hearing examiner made the following common pertinent findings of fact regarding DPW's calculation of ...

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